Change of Direction

Change from previous "Share Investment Journey" to "My Investment Opinion - A Different Kind" to widen my area of delivery of opinion and blog.

The recent investment environment seems drastic as stock prices are one day up and then one day down. My observation is that the hiccup was due to Europe financial problems. But the storm seems calm down a lot and August looks like a good month to invest in short term strategy. See you in future posts.

Another Two-week Shopping Window?

Malaysia will be having its two-week school holiday starting this Saturday (5th of June).

My earlier post indicated that stocks price may drop during school holiday but it is not consistent all the time.

But two things I noticed since the last observation:

1) One week before the school holiday, stock volume will be soft.
2) There is always a short rally after the school holiday almost 100% of the time.

But this time may not be the same as the World Cup 2010 will last until mid July. The rally will be significantly softened.

With all the negativity surrouding the stock market, it is safe to stay away from stock market until October. Here are the reasons:

1) School holiday from 5th - 19th. Rich dads will sell all stocks this week and only be back on the 20th.
2) World Cup will begin on the 11th of June.
3) Europe problems may last for a while.
4) A lots of Dr. Dooms from the US and Malaysian investment firms are making doomsday call on global stock market.
5) China's economy is shrinking but the inflation is hiking.
6) Malaysia will raise its sugar and petrol prices.
7) Malaysia ruling party's defeat in recent by-election in Sibu could have negative ripple effect.
8) RPGT of Malaysia started in 2010 may start to see the impact.
9) Downgrade of Spain
10) Strong Malaysian currency is still hurting exports and prevent foreign investments. Everyone is looking for cheap money these days. Not a good sign.
11) Recent potential fraud cases of Kenmark and Sime Darby may tarnish the image of Bursa.


It is very hard to find a bull factor to buy stocks for now. Even Warren Buffet is getting away from stock market. The Daredevil of stock is fleeing? It's odd. Maybe it is time say when Warren Buffet is fearful, be greedy. Just kidding.

Will History Repeat Itself?

There is certainly fear running around global stock markets and the possibility of a second dip is getting higher and higher.

The ultimate fear index:

The DXY accurately predicted the previous stock market plunge in 2009. Will this time be the same? Undoubtedly, the fear is confirmed and the VIX index is also correlating with DXY. One thing is for sure, the fear factor is very high.

Everyone is rushing towards cash. The problem now is to predict the reversal of such trend in order to profit from it. Inability to make good judgement could result in financial loss or loss of opportunity.

It is now a strategy play and this time is against the possible recovery of finanical system problem in the Europe and also the side effect that may put big hurdle to the global economic recovery.

If the DXY is a good indicator, this fear may also be overdone as shown in the double peak above back in 2008-2009. The first peak doesn't lead to major plunge in stock market. It was due to the Lehman bankcrupcy which was very limited to the company itself only. The second peak of DXY was due to the potential collapse of US big banks like BAC and Citigroup. The US government bailouts saved the banks.

This time round is the entire Europe. Greece is the starting point like Lehman Brothers. The EU bailout is similar to the US "too big to fail" bailout. Historically speaking, bailout should work at least for a while. One should expect the market to calm down a bit after the bailout but and yes, there is a "but" here, EU consists of many countries unlike there are only two parties in the US congress.

This also led to Warren Buffet's "fear" of the current situation and unprecedented EU bailout itself is a risk as it is an unknown factor. Investors don't like uncertainties and this could shun any potential interest in stocks.

Back in March 2009, US earnings reports were really bad and this time round US earnings are actually very good. But that isn't adequate to boost investor's confidence. Dr, Doom (Roubini) is also giving stern warning like the one back in 2008, coupled with Richard Russell who is giving a warning that is worse than Dr, Doom (Sell Everthing Liquid!), the fear this round may surpass the one back in March 2009.

Back to Bursa Malaysia. During March of 2009, companies are reporting bad reports as those in the US. This time round, the reports are as good as the rest of the world. Eventually rally in stock market must jive with good earnings and that is what stock market is all about, business.

My conclusion, this fear could be overdone as it may not affect the earnings of companies that are not relying on Europe's economy. If US companies are getting a hit in their earnings, it is time to "sell everything liquid". If not, it is a good time to "slowly" buy the stocks of good companies. The next earnings season is in September. That's the time we should "sell everything liquid" and wait for further signal from earnings reports of US companies.

Time to buy or bye?

The market is actually expecting another global financial tsinami as indicated in the following DXY index chart:

DXY, or an index of USD, has a lots of European currencies as its component. By comparing with the possible default of Citi and BAC back in March 2009, the market is expecting another financial tsunami in the Europe that could possibly sweep through the entire world especially in global financial market.

The market may not be right or it is always right? The market is always right as it indicates the current situation, fear. The market may not be right as the fear may be overdone and the future is still unknown. This sharp rise of DXY is more severe than the one of the US. It's always good to keep cash in this situation. Whenever there is a sharp drop in the DXY, it is time to buy. Hope you folks like my analysis and make some gains from it. Good day!

Bulls and Bears of the coming weeks

Bulls
1) US earnings are good overall
2) European financial crisis is subsided due to 1 trillion euro bailout
3) Greece and Spain problems are under control
4) US economy is improving overall

Bears
1) Bank Negara Malaysia raised another 25 basis point of interest
2) BJCorp/BJTOTO can accept bets from Worldcup 2010 or other sports games (more money will go to gambling than stock market)
3) Malaysian school holiday and World Cup 2010 are approaching fast
4) European massive bailout was unprecedented and everyone is cautious

The raise of interest rate by Bank Negara Malaysia (BNM) may not send the stock market down a lot as it was already highly anticipated and factored in manifested in recent Bursa sessions. The downside is also limited by potential raise of BLR that could spur a buying spree of properties before the hike. If there is no surprise, there is no huge market reaction. This is the rule and psychology of a stock market.

The biggest problem is still the coming World Cup 2010 and school holiday with extra spice from Sports Toto that accepts legal bets from the entire nation.

Stocks to watch? Buy at your own risk. Buy stocks that you are willing to keep for at least 3 months or you are in a good position to anticipate for a possible market slowdown ahead.

 

Interesting Week

Last week was a dramatic week in stock market history with European problems start to spread and inspired a fear in the US that may have caused a unprecedented plunge of DJi 1000 points within 5 minutes.

Last night, the US DJi surged more than 400 points after the EU approved on a 1 trillion euro bailout plan.

The credit crisis obviously has spreaded out of US to Europe. If it is not well controlled, it could be another financial tsunami that may sweep through the globe again.

The bailout is able to calm the market so far for now. What is in store for the coming weeks? I think experienced investors may start to play a defensive game here. Young and amateur investors will still jump into the gambling table but they may not stay there for long either. It now all depends on whether there are more problem with the Europe and probably in the US. With US recent good looking scorecard in the earnings season, US may be starting to recover from the '08 financial crisis. The recovery may be runied by European problems if not well managed and controlled.

What am I doing? I just sold off my HUNZA property for RM1.27 and I will be keeping cash and rest on the sideline waiting for more safe opportunity. It is always better to keep cash when there are so many uncertainties around. I may be wrong but it is always not bad to play safe. Playing too safe may be a problem too as it indicates my weak personality who always want to run away from problems. I will stand safe and bold to react to crisis as a responsible human being.

Bear is on its way?

The contiunous sell off in the stock markets around the world may indicate a bear market returning to the reality. Honestly speaking, it is quite hard to find a catalyst to boost the stock market as all of the good news have already been priced in. The Europe problem may just be the tip of an iceberg.

To buy, sell, hold or stay away?

Strategy wise, it is always wise to keep stocks of good companies at low price. Any sugguestion? I think low PE and good dividend are of an attraction to investors for now. I recently bought 50 lots (5000 shares) HUNZA Property averaged at RM1.23. I also let go all my TITAN averaged at RM1.28 with total profit of around RM1k. So far I am breaking even for 2010 with a loss RM1.8k before CNY, 0.8K profit from Pelikan, and 1k profit from TITAN. I am back in business with a capital of RM30k as at the beginning of this blog.

I am back in break even point waiting for new opportunity. The current strategy is to play a defensive game against forthcoming bad news from Europe and China. Hope everyone is not hurt in this market condition. Strategy is the key now.

Should I be buying today?

Everyone now knows there is a correction throughout the world with first China declared its slow down in growth yesterday and also the recent oil spill problem in the Gulf area. With Greece problem still unsolved, the added burden to the stock market finally adjusts itself in terms of pricing.

The correction seen today throughout the world left the investors wondering whether it is a good time to buy.

I also feel tempted to dip my head into the water a bit after seeing the price of some of the stocks that I previously wanted to buy. Here are the stocks I was watching: DUFU, PELIKAN, ETITECH (earnings this quater not good), LEADER, KFIMA, etc. These are value stocks with low PEs. PELIKAN and ETITECH are of special case as someone seems manipulating the stocks.

It's good to pick some defensive stocks too like BJTOTO. The best strategy is to pick up some and let it run by its own course. As the amount bought is small, one can afford to hold the stocks for a while until there is a buying interest that reflects in good selling price.

Is the bear back? I don't think it is quite yet unless this trend continues for a few more days. Happy trading!

Sell in May and go away?

Welcome to May 2010. There is well-known slogan among investors in the world saying "Sell in May and go away". This applies more to US as US is having its summer holiday and many investors are on vacation. This caused a in dip in trading volume which may indirectly caused a drop in stock prices.

However, for the past two years, the trend seems reversed and the surge in stock even happened in May and the months onwards. My explanation for this phenomena is that when the economy is bad, there are less investors go for holiday and the stock market is still hot and the beach is less crowded. People refrain from travelling as the cost is high and personal budget cutting is good for the pocket during hard times. That is why we see the reversed trend in the past two years.

How about 2010? It depends on the number of investors that turns into traveller's headcount. By looking at the oil price and economic condition, I would say there could be a small correction in June. The reason is that there will be more investors turn travellers this year due to the improved economy. However, the recovery is still not strong enough with the US unemployment rate of 9.7% and interest rate of record low, stock market is still a better place compared to beaches. Some who made a fortune in 2009 record surge in stock market may sell in May and go for vacation. This may caused a small dip in trading volume and thus a small dip in stock prices. That is how I hypothesizes a small correction in June.

But all these assume that there will be no problem with the rest of the world. If Europe problems erupt one by one, there will be corrections but the correction could be small unless there is a systemic problem with the Europe economy.

Therefore I would say "sell in May and go away" but don't expect big correction as in March 2009.

Bulls and Bears of The Coming Weeks

Bulls:
1) Malaysia GDP revised up again
2) Strengthening RM signifies demand
3) Thailand Problem may be a good thing for its neighboring countries
4) Greece Problem close to an end

Bears:
1) Strengthening RM hurting exports
2) US civil lawsuit against Wall Street giant Goldman Sachs (may be more to come, thanks to Michael Moore, you are my hero)
3) China asset bubble worry some analysts
4) World Cup is approaching (Investors may swtich to gamble on the game than investing in stock market in June)


My TITAN holding had been reduced to 150 lots (RM18K) from 200 lots on Friday due to strengthening ringgit that may hurt export very bad. Monday morning could be a good time to buy in some stocks if it drops a lot. Buy those with strong dividends at this forthcoming volatile week ahead. Have a nice weekend!

My Love for Titan

Titan Chemicals (5103, Main Board) announced on the 22nd of March that it applied with Bursa for a relaxation in dividend payment restriction and got approved in 25th three days later with a tax exempt dividend of 4.5 cents to be announced soon. The coming GM will have the date announced on the 27th of April.

It is expected to rise 4.5 cents on the date of announcement on the 27th of April. I currently hold 20 lots of the stocks. I like this company (temporary) as it tries to distribute more dividend. There may be underlying hidden agenda but for now it is a good place to put my money in. With 4.5 cents of downside protection, it is worth the money. 4.5 cents of current price of 1.22 yielded a 3.7% potential gain in short term has rendered a temporary love for this stock. Falling in love in stock is not a good strategy, I would say it is just a crush, a crush on the coming dividend.

In stock market, don't get emotional or fall in love. It has to be reasoned and well thought of.

We'll see if this TITAN can win over my love before the announcement on the 27th. There are still two more weeks. A lot of things can happen within these two weeks. Go! TITAN! Go!

Squeezing the Orange

Bursa is being squeezed for the last drip of orange juice. One can see the low PEs counters were being rotationally pushed up to reach the PE level they deserve. For example, MPHB, FAVCO, ANALAB, KFIMA, etc. These are the counters I like due to their low PEs. Unfortunately, due to hectic schedule, no buying was done previously.

This is very obvious that the market is looking for catalysts to buy in more stocks. As predicted, some try to push up rubber stocks in some forums due to re-emergence of H1N1 in Malaysia. Such act is immature but also anticipated. Shouldn't we care more about our hygeine than speculating on the glove usage? In fact, glove and H1N1 are not related. Public don't use glove to prevent themselves from H1N1. They use masks instead.

Hi! H1N1! You are not welcome back. Please leave as soon as you can.

Bursa is Hot

Hot Hot Hot! With all the good news surrounding Bursa, buyers flock into the stock market. This is similar to when our Ex Prime Minister Badawi announced the NEP (New Economic Plan) a few years back. There are also rumors before the NEP back in 2005. He visited a lots of countries and received a lots of support before the announcement. Stock market shot up after that. (We also know how the stock market plummeted in 2008)

Will this time be the same? It all depends on the PE of Bursa. I don't have the number with me. It can be calculated by averaging all the Blue Chips' PE.

The market is very hot now as many stocks can give more than 10% return at any time due to speculations and syndications. My experience tells me to watch the market closely and cut loss if there is any correction anytime. "Be Fearful When Others Are Greedy" is always the best motto in stock investment. But I think the rally may last for while until there is a very bad news from oversea stock market. We'll see.

I recently purchased 10 lots of TITAN and looking for more potential good stocks to jump into in order to take advantage of this rally. This rally may be short-lived or last for a few months. Nobody knows. The best strategy is to buy good company stocks as foreign investors like: Good Management, Daily Consumption or Gaming. For Malaysia, plantation companies are of good selling point given the geographical advantage of this country.

Woody Monday

After Malaysian prime minister visit to Hong Kong, there is a small rally in the plantation and steel sector today:

Wood: WTK, PWORTH, LEWEKO, ...
Rubber: LATEXX, ADVENTA, SUPERMX, ...
Steel: LEADER, CSCSTEL, ...

What's next? Since there is a NEP announcement tomorrow, the market should look bullish today unless the sunken South Korean naval ship found the unfavoring as the cause: North Korea.

Last NEP announcement by ex prime minister Badawi put Bursa in a frantic buying mode. All the plantation stocks soared like crazy in 2006.

The Bull Mentality

After a week of school holiday, all traders are back with all the good news surrounding Bursa. First of all, the foregin fund (fun) manager upgraded Bursa. The stocks surged. Then Nanyang Siang Pao was sweet talking about REIT stocks that can promise a return of 8.7%, all the REIT stocks went up. Now Malaysian Bank Negara revised Malaysia GDP up to 5% by the end of the year, the stocks go up like crazy today. Everything is so hot and I am a bit suspicious. Maybe I think too much. What if they announce all these good news last when everyone was in holiday mood? Just curious.

Rich Dads and Moms are Back!

My theory is proven right today with all low PE and rubber stocks being "cooked" up today. My conclusion: syndicates are rich dads and moms. They are just back from last week holiday with kids.

Stocks I'm watching: Titan.

Stocks I'm giving up: Pelikan. It has announced more takeovers last Thursday. The list is very long. There is a high chance that there won't be any dividend this year. A classic example of company that ignores the shareholder's benefit. Just like Astro.

Hey kids, back to school and study hard! Your dads and moms are making easy money waiting for your next vacation!

Missed a Golden Opportunity

My several recommendations of Astro in the past few weeks did not come in empty handed. Although I did not buy before the announcement, at least I made the right call. I congratulate to those who bought before the announcement of privatization of Astro. Kudos!

Good Bye Astro!

Banking Stocks are in Trouble Again

As Bank Negara Malaysia (BNM) is signaling possible further interest rate raise, banking stocks will be hit until the rate hike is realized or the call to raise rate has been withdrawn. Banking stocks will be volatile. Be careful.

Update: If US Fed signals a possible interest rate hike in the horizon, stocks will go down especially the banking stocks.

Crazy Rich Dad Theory

Malaysia is having a school holiday week for a week from March 15 starting today.

From the recent past school holiday, I notice one stunning phenomenon: rich dads are going to holidays. Please look at the following recent KLCI chart. You'll see this stunning discovery:

One crazy observation is that whenver the rich dads are going to holiday with their kids, the KLCI was stagnant or dropped slowly. But when the rich dads are back from the holiday, the CI surged. It has been quite consistent for the past few recent holidays.

One minor exception is the CNY 2010. Since everyone needs money before the CNY, the sell-off starts two weeks before the new year. The last few days before the Chinese new year, the CI surged due to the fact, selling at those time won't see the cash due to the T+4 cash release hold period. One consistent observation is that there will be a surge after the school holiday. Will it happen to this one week short holiday? Will dads sell their shares last week and come back to buy back shares they sold next week?

This is just a common sense. Whenever there are more people buying stocks, the stock price will go up and vice versa. That explains why CI surges every time the school holiday is over as rich dads buy stocks when they are back to work or to invest in stock market to earn back the money they spent (poor dad).

Since this week is a holiday week, will volume drop to indicate good buying opportunity? Will CI go back up next week if it drops this week? We'll see. It's just a crazy theory.

Profit Taking

Bursa is heavily hammered by profit taking yesterday and today. I also sold off my Pelikan @ RM1.31. Profit is around RM450. I missed my target by much (@RM1.50). I planned to buy back Pelikan if it drops further. I need to find out what caused the heavy profit taking today before buying back the stock as the condition is nowhere near sanity.

Something is fishy about this profit taking Friday as the world markets are still holding up well. Probably it is due to conservative mentality or political rumors that are spreading around out of my radar. As Greece problem may be worsening due to strikes, I think everyone feels safe to keep cash for the weekend.

This is not a good day and my profit taking is immature. Bank stocks are heavily beaten after the explosive rally on Monday. In the long run, banks are still the winners of the increase in BLR unless the policy changes again. Maybe it is time to buy some Public Bank stocks. CIMB fundamental looks strong too but its political ties could be a threat to the bank someday.

Winners & Losers

The recent bank policy changes (Saving Rate 2.25%, BLR going up) in Malaysia shake the stock market with the following winners and losers:

Winners:
1. Banks (only if Housing Loan is abundant)
2. Banks
3. Banks

Losers:
1. Property Markets
2. Construction Companies
3. Test for Property Bubble in Malaysia
4. Furniture Companies
5. Renovation Companies

Stock to Watch?
I only like Public Bank (I also recommended last Wednesday before the surge) as it is clean and doesn't need government's support or backing. No hanky panky to play with numbers or to acquire other banks using tricks.

What does it mean?

The US unemployment rate for February 2010 is finally out last night: 9.7%, the same as last month. Here is the chart from 1997:

If the rate keeps stable, it doesn't give much signal whether the economy is recovering or getting worse. In fact, for such unemployment rate during winter time, it is possitive as the rate could have been more optimistic if it is in spring or summer. To me, I still cannot make a conclusion as we are having a slow business period throughout the world in March.

My strategy:

Buy Astro for mid term investment. I haven't bought yet as the price is still not attractive enough.
Buy Public Bank for long term investment. I haven't bought yet as my fund is too small for long term investment.
Buy Pelikan for mid term investment. I bought 5 lots using my MBB account @RM1.21. I will post the slip soon. I would expect good earnings from this aggressive yet defensive stock in the quaters to come. My target sell price is around RM1.50.

For short term investors, they are plenty of choices. Xinquan can be a good candidate as there will be another new China shoe IPO coming and also the dividend is going to Ex soon. Other counters include XDL, ETI TECH, etc., can be a good choice for short term investment as these counters are selling at a significant discount. (ETI TECH is being sold down by Dubai investors and syndicate recently; XDL being sold down by faulty Bursa earnings report and the mistake has been corrected and addressed in Bursa website. The EPS was earlier reported 100 times less! It's 1000% undervalue.)

Bulls and Bears of the coming weeks

Bulls
1. Greece problem has been actively resolving by EU members especially Germany and France
2. US economy is improving
3. Global economy is improving except Portugal and Spain
4. World cup is coming soon
5. Malaysian economy is improving like many other countries

Bears
1. Bubble in Portugal, Spain and Dubai may surface soon or anytime
2. Malaysia possible interest rate hike today
3. Malaysia possible petrol price hike these few days
4. Greece rescue may not come as soon as everyone expected
5. George Solos comment: "Gold is the ultimate asset bubble"

Uncertainty
1. USD direction

Stock Choice
1. Astro
2. Public Bank (After interest rate hike)
3. Pelikan

I wish everyone happy investing!

The Tale of DXY

Since DXY consists of five currencies: Euro 57.6%, Yen 13.6%, Sterling 11.9%, Canadian Dollar 9.1%, Swedish Krona 4.2%, Swiss Franc 3.6% and with most weight are put on the Euro (>50%), DXY seems like an indicator of how European sees USD.

Yen could represent Asian countries but the weight is only 13.6%. Therefore, DXY index can be a good indicator of fear in the Europe rather than an indicator of global fear towards US economy.

The recent better than expected signs of recovery in the US economy lifted the DXY as well as the fear of bubble in Europe.

As one can see that ever since the emergence of fear in Dubai, the DXY increases until today. There is a small drop in the middle and it was caused by the improvement of job condition in the US.

DXY shows that there is still fear in the Europe.

Hybernation is Over

After a long vacation, it is finally time to get back to analyse the stock market.

The stock market has been weak for the past two weeks during my vacation.

The weakness was due to Greece problem, potential interest rate hike across the globe and China's tightening its loan policy to curb asset bubble problem.

Since the Greece problem is temporarily supressed by EU initiated by Germany to bail out Greece, bubble effect should subside a bit. But there is also a fable initiated by Marc Faber or also known as Dr. Doom told CNBC on the 16th that China bubble will burst very soon. (refer to this report: http://www.cnbc.com/id/35444726)

Today's rally is due to US Fed assured that increase in bank discount rate may not mean the increase of consumer or business interest rate soon last Friday. Asia and Europe stock markets plummeted sharply last Friday after US increased its bank discount rate last Thursday after US stock market closed as Ben Bernanke used this method to stop the housing bubble in 2008 followed by cuts in consumer and business interest rate. Speculators may see the reverse of this may finally lead to increase in consumer or business interest rate that will cut the banks' profits.

I will touch more on USD soon. Hopefully I can run a full analysis of USD tomorrow. Happy Chinese New Year to my fellow bloggers!

Hybernation Time

Although winter is almost over, it is time to spend with family and household chores. Money cannot buy harmony and time. Since the market is a bit headless (with a lots of uncertainties) and the festive season (CNY) is coming in a week's time, it is the best time to take some rest after a month of non-stop blogging.

Since the lack of buyers may send the market down for next week, buying opportunities may arise. Like our share god Warren Buffer says "Be Greedy when Others are Fearful". This slogan may be a good guideline for the coming sessions. Take opportunity when you see your favorite stock become cheap! Happy investing and have a great new year!

Fear is Back!

This correction due to uncertainties across the globe could stay for a while. It now depends on how US is going to assure the world tonight. It is very predictable that someone will step up and say something to calm the market like what happened in the end of 2008. Usually US Fed Chairman will say or do something. He has been quiet since his re-election. Back in 2008, he will say something even if the Dow futures was down more than 100 points to calm the market. I am not sure whether he will perform the same trick tonight.

To me, the wind has changed. A new life is found. Holding not proven companies' stock is a joke now. Therefore I let go my XinQuan and Melewar until the companies are able to come out with good earnings for a few more quaters. The game has changed as DXY indicate a high level of fear around the globe. Buying defensive stocks is a better strategy. Although I suffered a 7% loss in January, I will fight on. My journey doesn't end yet. With a new fresh capital of RM28k (2k loss), I think 28 is an auspicious number.

Those who read previous blogs should know that bears are coming and coming quick. Hope they do well in their portfolio and stand strong to continue investing with a smile.

My journey doesn't end here. It is just a wind of change. To change to adapt to the environment instead of going against the wind. Good luck and happy preparing CNY!

CNY Sale + Divorce?

Retail investors are cashing out to fund their own CNY festive expenses. Even with good news around the world, rally is not realised in Bursa. This is expected by many as many are selling their shares as they need cash now.

With increasing selling pressure, the buying pressure will increase next week. Those who are cash rich should go back to stock market and get some bargain.

That is why I always ask myself: what if everyone is selling two weeks before CNY? This is what we are seeing now. Low volume with selling pressure to gain access cash for festive expenses.

Is it a "decoupling" (divorce) phenomenon? Yes, for a rally but no for a dip as Bursa is still married to a bearish trend if there is any. This is due to the local desperation of cash. It's only temporary.

BSDREIT Earnings Review

The BSDREIT earnings report is out on the 29th of Jan 2010, last Friday. This is the headline of the report: "Financial year end net profit 83.170 million (decreased 56.26%) " which doesn't sound like a good news.

The earnings scorecard:

Probably it is the Malaysian culture that analysts don't look at the revenue. To me, it is the first thing to look at. It tells you directly whether business is good or not. The BSDREIT revenue looks good as it increases compared to the previous year.

Next I look at the profit. Profit is the indicator of the management's efficiency and overall productivity. But sudden profit drop doesn't mean anything as it could be due to extra money spent on expansion in that quater.If the profit keeps on dropping for years, it is whether the management is not doing its job or the business nature is getting worse. BSDREIT huge drop of profit compared with last year's may not signal any problem with the company. It is acceptable if it only happens for one quater.

Next, it is the EPS. It tells you how expensive the current share price is. EPS alone may mean nothing as one needs to get the PE ratio to check if it is expensive. PE of 10-20 is acceptable for current Malaysian REIT market. As the profit takes a big hit this round, PE should increase. The PE is not looking good for this quater.

The NTA or Net Tangible Asset is what I usually ignore as it is the net worth of the company if it is sold today. If the company is to be sold, the NTA will be manipulated to the price that they want. There is nothing a retail shareholder can do anything about it. Even if you yell at the management during AGM, it won't do any good. This is the part I usually skip. But one needs to make sure that the NTA does not differ with the share price too much. If it is, the company is spending too much money on advertisement, or very depreciative expenses. The increase of BSDREIT NTA may indicator the purchase of new property for the current quater. This may explain why the profit takes a hit this quater. In overall, the company still looks healthy.

Anyway, I have disposed my BSDREIT last week at RM1.36. I will consider a buyback in December 2010.

Bear is exhausted

After a week of falling last week, bears finally take a rest.

To me, it is more like a technical rebound. This means the falling trend will continue if there are more bad news.

After a week of bear action, no news means good news. Those who are fearful already sold their positions. Any emergence of new buyer will send the stock price higher.

The biggest threat to the upside now should the potential interest rate hike throughout the world. If rate hike happens in Malaysia increasing the current rate of 2.0% to 2.5%, banks are supposed to pay 25% more interest to their customers. The Malaysian bank's profit will take a 25% fall at least from the saving accounts department. Avoid banking stocks at all costs until the interest rate hike is announced in Malaysia. As for Public Bank Berhand (PBB), the best entry point is RM8.80 if it falls to that level. Since PBB has a lots of die hard fans around, it is quite hard to fall until RM9.00 I think. Anyway, it is also good to take a rest from the falling indices around the world. Whew!

Bull and Bear Factor of the Week

Bull Factor:

1. Hang Seng closed positive, sharp recovery from deep red in the early morning despite all the bad news running around
2. Dow Futures stands at +42 now
3. Greece potential bankruptcy has been addressed in a secret meeting over the weekend in Europe. It's good that everyone knows about it and is trying to fix it
4. More good earnings from companies around the world
5. No change in US Fed Chairmanship

Bear Factor:

1. Greece potential bankruptcy may not be stopped
2. China-US trade conflict
3. Bearish online forumers, bloggers and newspaper articles
4. George Soros is betting on double-dip 'W' recovery
5. CNY is very near. It's too late for a rally to make money to spend before CNY
6. Malaysia's car insurance rate is up
7. Worldwide concerted effort to raise interest to combat "phantom" inflation
8. Sharp rise of DXY could indicate fear
9. US economy is NOT recovering fast enough

The word "phantom" is used to describe the current inflation as the inflation was due to falling USD and not demand.

Married to United States

FYI: Tomorrow KLSE is closed due to public holiday in KL.

"Coupling" is the technical term used to describe the closed relationship between two stock markets.

There are people who are curious about why the fall in the United States' stock markets can have adverse effect on other stock markets that open the next day. Why?

We need to understand the economy to explain this phenomenon. If the economy of particular country has closed relationship with the other one, they tend to share the same fate in the stock market. It also depends on how matured the investors of a particular country. Everyone has the choice to buy or sell at a particular time. No one forces you to sell or buy any stocks. There are people who like to refer to other stock markets to make their decisions. These people are usually of more of a trader type than investor type. They don't hold position for a long time. They are even day traders. Those who are familiar with Forex should be very clear about this as Forex trading are traded for a very short term only.

Eventually, all fund managers know that during a bear market, those who sell last will get the worst selling price. That is the reason why stock market falls very quickly whenever there is economy related bad news in an influential country as investors choose to cash out as a safety measure. If the news turns out to be not so threatening, investors can buy back anytime.

In summary, why does a stock market fall? Just to play it safe.


How to play safe in next week's stock market? Monitor in the sideline.

The Ultimate Fear Indicator?

Usually when people are talking about safe asset, people refer to cash.

For most investors, cash is the last resort to safety.

DXY is an index of USD against 12 major currencies in the world.

It should be the most accurate indicator of fear, at least the past two years. When people are buying USD (the safest currency in the world), there should be some incidents going on to make investors nervous enough to convert investments to cash especially USD.

Here is the ultimate fear indicator:

First I did some benchmarks to past events to check the accuracy. This US suprime loan bubble was the best example. They all started when the (A) US SEC started make the credit rating transparent as they suspected that invetment banks were hiding something. (B) The transparent new rating did catch a big thief, Lehman Brothers. But USD starts to fall after that as foreign investors were leaving US. Then the matter was not all addressed by sending Lehman Brothers to take all the bullets. The real fear set in as investors know that it was just the beginning of the problem and starts converting all investments to safe cash (USD). Eventually USD was overbought and US Fed was announcing that they were printing a lots of money. USD started to plummet as printing money was just hurting the value of USD. Unfortunately, even selling USD won't help diminish the fear when (C) Citigroup, BAC and AIG were hinting that they might have some big issues. Even with the sharp dipped USD, investors were still cashing out which contributed to the new height of USD. It was the king of the fear type of situation. (D) In March 2009, Citigroup, BAC and AIG all received financial aids from the US government when respective company's shares were being converted to USD from the government. USD was starting to fall slowly ever since as people felt safe to invest again by using their USD to buy assets, stocks, etc.

In Jan 2010, US unemployment rate started to recover from the alarming uptrend. USD was in demand again as people needed to buy USD to purchase US assets. USD received warm welcome but demand was suddenly diminished as the US unemployment stays at 10% instead of going down.

A week ago, US President declared war on US banking system which sent fear throughout the world as this could indicate a major shift in the banking system. People start cashing out again until today. The spike indicates fear again. Cash is the only safe haven.

Enough for the history of the US subprime fairy tale, what's next?

By looking at the past trend and history, fear is rising at a alarming rate. Investors may keep converting investments into USD until the US President is clear of what the change to the US banking system is all about and the US unemployment rate starts to fall again. But falling unemployment rate can send the USD up again. That's the time I will use the word "decoupling" when USD no longer indicates fear. USD will go back to the supply-and-demand good old day where USD is just one of the many currencies.

CNY Rally or CNY Sale?

Everyone should be curious about this coming tiger. Is it going to eat you or it is going to show you its boldness?

The stock markets dislike uncertanties and potential bubble. Let's see how my past analaysis is doing today:

(Posted 2 days ago)

1) US President's intention to control Wall Street and remove life support for banks
2) Undecided decision for US Fed Chairman Ben Bernake to 2nd Term   Bernanke won 2nd term
3) China's Government to Limit Loan Facility

Anyway, new fears are being introduced into the system:
1) Greece and Spain potential backrupcy
2) China and Dubai asset bubble problem
3) Roubini says asset bubble is confirmed in China (Wednesday)
4) Geroge Soros says US will be in a 2nd recession (Wednesday)

I would like to also add another fear item#5 which everyone doesn't like to see: Asset bubble in Malaysia. We should be able to see the bubble starts to surface in April when construction companies in Malaysia start to announce earnings report.


My prediction:
Make medium term gain until end of February and get away from stock market or hold REIT shares with good earnings. Come back after the asset bubble in Malaysia is burst probably in April or May. My stock purchases will be sold whenever there is a chance. George Soros may be behind all these as he wants to buy cheap shares soon.

This tiger is great too.

Current Holding and Decision Time

 Yesterday was a panic selling day that everyone is still talking about.

I made decision to increase my holding of stock instead of unloading stocks:

Added 5000 share of MELEWAR at 0.645
Added 2000 share of XINQUAN at 1.12
The total position so far is:

15000 shares of MELEWAR averaged at RM0.682  (ignoring transaction fee)
7000 share of XINQUAN averaged at RM1.177 (ignoring transaction fee)

40% Cash and 60% Stocks.


The decision now is to reduce the positions or to hold. Increasing stock position is not recommended at this moment.

If the stock market is unfavorable, reducing position is a better option. We will see the direction of the wind in the next few days.

I also planned to buy some ETI TECH in the coming days. It is good for long term.



Global economic view:
The US President's Obama's State of the Union presentation is quite successful as he is trying to please everyone which helps boost the confidence of all individuals in the states.

US Fed Chairman Bernanke's reappointment today can be another boost to the possible rally in the next few days. If Bernanke has failed to be "rethroned" today, tomorrow can be a very ugly day but for just a short period of time as changing the captain in a battle is always not recommended. The battle over financial crisis is considered a big deal. It is unwise to change the leader half way of the battle.

China's asset bubble is believed to be controlled well under careful Chinese government.

US coming unemployment problem may post another threat to the US consumer confidence. George Soros has spoken that US is going to have another recession very soon. He also predicted the last recession. Dr. Doom is also giving another warning at CNBC interview on 27th of January 2010:

Roubini: Asset Bubble Is Beginning Now

Link: http://www.cnbc.com/id/35078010

The Stock Market Doesn't Like Uncertainties

3 Major Road Blocks to higher closing in global stock markets:

1) US President's intention to control Wall Street and remove life support for banks
2) Undecided decision for US Fed Chairman Ben Bernake to 2nd Term
3) China's Government to Limit Loan Facility

Fund managers don't like uncertainties. Retail investors don't know about this pitfall. If you look at charts throughout global stock makets for the past 2 weeks, whenever the headline from one of the 3 items appeared, the global stock maket dropped.

US consumer's confidence index is up for the 3rd straight month. Japan and Korea should be smiling after a week's drop. They export a lots of electronics gadgets to the US.

As long as these uncertainties haunt the stock market, the rebound will be limited. Item#2 from above will be resolved this week. Item #1 & #3 will linger around for quite some time. Item#2 will be replaced with refreshed fear of rate hike by US Fed.

Good Time to buy? Yes but buy a little bit at a time and don't get loan to buy as you may need to keep those stocks for a while.
Reason? No systemic problem with the US economy. But watch out for Dubai and Greece. Chinese government should be competent enough to prevent the building asset bubble.
Stocks to watch:
ETI TECH (good deal, Dubai's loss is your gain, stock at great discount price)
All the REITs (paying out good dividends, stable during correction, defensive)
Stocks to avoid:
Those with chart of reverse 'V'

The Bull is Tired

After running wild for weeks, it is taking nap and may be back for more. Gamblers are advised to be contended of their earnings and reduce the stake. Investors are advised to exercise with caution by reducing stock positions and increase cash on hand.

While waiting for tiger, the ox is taking a nap. It may be back for more in the afternoon.

We are just 19 days from Chinese New Year. Counting down... 19... 18... 17... 16...

TA or FA or just Follow?

There are three types of trading mentality:

1) TA - Technical Analysis
2) FA - Fundamental Analysis
3) Just Follow - Gamble or too lazy to run any analysis

Most investors are against type number 3. For Type 1 & 2, there is a big debate going around the world .

To me, everyone is trying to predict which stock that will be going up. That is the whole idea. Nobody wants to buy a stock that will go down and down. There is no point to argue about which type is better. But I notice something wrong with TA folks who always argue about their superiority. I later found out they have their own agenda of doing so:

1) They want quick money
2) They want other to follow (the more people who follow you, the chance of the stock to go up increases)
3) They own blog(s) to make money from advertisement (the more the reader, the more the income, some even sell e-books or collect illegal member fees)
4) They understand the fundamental of trade: demand up, price up

Those type of TA folks are preying on new comers to stock market to earn their trust. If they are successful in building their follower base, whatever buy call they make, the price will go up. Besides making money from advertisement, they make big money from stock market as well.

TA is just a way to look at the trend. It is able to detect hidden news that only insiders know. For certain stocks, if their fan base is using TA a lot, they tend to be accurate. Is it able to predict the future? Yes and no. Yes, if someone is trying to push for the stock they ran TA on it and the rest will get the same bullish signal. No, if no one wants to push for it. There are so many stocks to choose from. If a few TA followers spot on the same stock, the stock tend to go up as the demand goes up. That is why TA followers need to spread TA news around to make they TA technique work.

To me, it is a bit unethical although there is no law broken.



My rule of thumb in stock market:
1) No money fall from the sky
2) The demand goes up, the price will go up


Today update:
Malayisan stock market is holding up quite well despite there is a panic in Japan and Hong Kong. Singapore and Malaysia are sharing the same Chinese New Year bull force refusing to drop a lot. No sale today.

What is in store for next week?

Next week could be a turbulence week as there many are signs of bear coming out of the woods.

Anyway, the following bulls and bears indicators summarize this special phenomenon:

Bears:
- US Dow Jones dropped more than 200 points last Friday
- US President Obama's intention to control US Wall Street (Banking System)
- US Fed Chairman is be appointed to chair for the 2nd term but it is not yet confirmed
- KLSE is approaching Chinese New Year when people are planning to sell before the long holiday season
- Blogs and forums are getting bearish day by day
- Earnings Reports are still flooding in when the expectation is high
- US Unemployment rate could sustain at 10% and not going down
- China's government is trying to limit bank loan signaling a bubble in the making
- Genting Singapore has been downgraded by Citigroup

Bulls:
- Apple, Yahoo and Microsoft are expected to report good earnings
- There is no systemic problem with US economy
- Some investors in KLSE are still bullish especially counters that are still not up a lot in the past few weeks
- Many KLSE counters are expected to report good earnings and dividend


The US stock market doesn't like uncertainty. There are quite a lots of uncertainties in the US. But if the uncertainties are confirmed to be better than expected, the stock market can rise again. With most of the uncertainties are still in place, US investors will most likely take a cautious trading practice.

As for KLSE, there are still companies that are undervalue. A thorough fundamental check is needed to dig out those hidden gems.

Anyway, caution is the key to next week's trading. Be happy and life will be easy!

My Trades and Opinion for Next Week

Sold BSDREIT RM1.36 2000 shares. The profit is RM120 - RM30 (Transaction Fee) = RM90. I will post the statement slip after I receive it.

I bought the shares for three months at RM1.30 to test my holding ability. I used to be an impatient trader which cost me a lots of money. I treat them as lesson fees. I don't want to repeat the same mistake. I treat it as a way similar to stop smoking. Bad habit is hard to change.

My target for BSDREIT is RM1.40 or RM140 of dividend as BSDREIT was giving out 7 cents of dividend in February 2009. 20 lots of BSDREIT will give RM140 of dividend. But I choose to sell it off before I take the dividend to strengthen my cash position. RM30 is my stadard way of calculating buy/sell round trip fee for trades below RM3000. I don't get into detailed calculation unless my capital grows above RM100k. My current trades are too small to deserve any accounting pratices.

My premature selling of this stock is due to the unfavorable market condition next week and it is very closed to my target. REIT stock won't go up a lot. The gain is just 3.5% (RM90/RM2600) but it is still 1.5% higher than FD rate in Malaysia.


My take for next week?

The visit of this blog is going downhill just like the stock market. I think everyone is busy grabbing the last distribution of red packet money from the stock market to buy new clothes, furnitures and get ready for major housekeeping.

As I skim through the blogs and forums, everyone is still very bullish. But they are just retail investors who won't have the ability to move the market much. In every stock market, the biggest market movers are the fund managers. If they are bullish, the market will go up. If they are bearish, the market will go down.

First we need to understand why the stock market retreated for the past few days.

Yes, it is the US President Obama's intention to regulate the banking system on Thursday and Warren Buffet's negative view on US economy on Wednesday. One is the most powerful man in the world and the other is the most influential investor in the world. They both make statements that are against the current bullish stock market environment.

How about my take? I think it is still bullish as there is no systemic problem with the economy. President Obama and Warren Buffet were doing the right thing: to cool down the overheated stock market. Such correction is very healthy in the long run.

I will buy some ETI TECH as it is selling at a big discount and the downside is very limited as Emirates' investor have significantly reduced their exposure to this company. I may buy back some BSDREIT it falls to RM1.33 or lower.

Other shares that I have in mind is Astro (for medium term, will sell after World Cup 2010 started), HLCAP (still investigating), E&O (if it falls bellow RM1.00 or lower), BOUSTEAD (if it drops a lot), SUNCITY (if ti drops a lot), PELIKAN (if it drops a lot).

With such market condition, I will keep 50% of cash.

Cheap Stock Sale Finally Here?

1:00am: I guess so as US president Obama is trying to blame banks for causing this housing bubble and the bailout was solely to help banks using people's money. He wants banks to pay back the price for sacrificing the entire nation for their failures. Most importantly, he is trying to prevent the next bubble caused by those reckless banks by imposing regulatory changes to banks. What a heroic thing to do. Although I am a shareholder of Citigroup, I salute you, Mr President. The extreme greed in Wallstreet should not be tolerated. We are not the slaves of US' Wallstreet. Prudent regulation is the key for the survival of capitalism.

This is similar to Penang's initiation to push for "plasticless" Monday. A group of plastic manufacturers urged Penang's Chief Minister to take back this order just for the sake of this small industry. What a selfish thing to ask for. Those businessmen just take care of their own pocket and sacrifice the entire state. Luckily the Chief Minister knows what is right to do and firm in his stand to protect the environment. I salute you too, Mr. Penang Chief Minister. Money is not everything. What is money if your kids are plagued with higher risks of cancers that can be easily avoided and plastics that is hard to be recycled?


However, this may only cause a short-term panic to the stock market unless the US unemployment rate is up again which will be announced in the coming weeks. This announcement by US President Obama is unprecedented. That also caused the rise in VIX, USD and drop in commodity prices. The stock market may need some to adjust to this sudden change. Stock markets could suffer a shock. This could also be a good time to collect some stocks with good profit and growth if they fall substantially for the next few sessions in KLSE.

Cheap Sale in KLSE?

A lots of people are waiting for panic selling in KLSE today but it seems to be holding up well. So no discount today.

Emirates' investors finally offloaded a big chunk of its holding of ETI TECH shares yesterday and today. I am not sure whether they are holding any more but it is a good sign for ETI TECH or 'EDDIE' or 'ET', the nicknames I gave to this stock. Bad news is that Dubai or Abu Dhabi is in urgent need of cash. I am not sure how the bubble in Dubai will affect the rest of the world. Is it really resolved? It is still struggling? Or it is just matter of time when bankrupcy is imminent?

China's announcement of tightening its loan policy for banks sent a small tidal wave across the world. Combined with dissappointing Bofa (Bank of America) earnings result, US stock markets are not doing quite well yesterday.

Two bubbles burst. (US and Dubai) One is coming? (China)

The warning from Chinese government also sent a fear signal to Bursa Chinese stocks holders. MSPORTS, XINQUAN and XDL are being ignored or deserted due to this matter. The rally party was short lived.
Rotational jackpot still continues in Bursa. It feels like standing in a casino where people are buying and chasing hot stocks.

Will Warren Buffet's "To be greedy when others are fearful" work in this situation? No, as there is no fear. It should be the other way round. But the fear in US Wall Street overnight showed mild fear. Finally, everything gets balanced up as fear and no fear are in neutral state now. No too fearful and not too fearless. I believe the market will go sideway.

Jackpot Time?

Almost every session now in KLSE, you see stock with the surge of 30-50% within the first hour of trading. This I call "Jackpot".

Malaysia has very strong syndicates working behind the stock exchange. They usually introduce this "Jackpot" phenomenon to lure buyers.

Bursa sometimes gives them a UMA (Unusual Market Activity) suspending the stock for a short period of time, but it is no longer working. It used to work fine during its introduction to the system years back.

Stock market usually turns into a casino when it is closed to Chinese New Year.

During this time, long term investors will need to resist the temptation or give in to the temptation of fast money. A lots of people are winning the jackpots these days and I hope they can keep the money for the new year.

US: A rally that is due to a long weekend after people offloading stocks last Friday. A common psychology of an investor: I don't want to keep my stock over the long weekend especially during earnings season and the stock prices are almost over the roof! Citigroup posted a terrible loss and the share is up 3.5%! It is a bit hard to understand for many. Actually it is due to the offload of TARP that finally factors into earnings. TARP is like a timing bomb on a bus waiting to be set off. The bus driver has no control over what the timing bomb is for real or it is just a sensor. Citigroup is now back to a normal company without the handicap sign on the windscreen.

My Holding: Still as before. Tabung Haji bought 2 millions of Xinquan shares. I am also waiting for BSDREIT to announce dividend.

Up or Down?

Nobody knows. But I am sure it will flutuate between up and down.

People are getting impatient to make money nowadays. It is not a good sign as impatient traders are not long term investors. Imagine everyone is short term players in the stock market, what if everyone is selling? It is the long term investors that keep the stock market from crashing. There should always be someone who is holding the stock, right? The CEO? If CEO or board of directors or the companies themselves are supposed to pick up the stocks left by others, the company doesn't even need to be listed the first place as the directors or the companies are rich enough to fund their operations and projects.

For a healthy stock market, it is better to have more long term investors than the short term type. The lack of it will become another 1998 in KLSE. Someone likes to see the stock market crash as stocks are cheap at that time. But it can affect the economy very badly which results in high unemployment rate followed by crime rate (in third world countries only). Even if you are rich, your money and life are not safe. What is the point?

Back to today's stock market. Chinese shoe makers are getting a good comeback this morning session but it seems to be losing steam. My Xinquan is inviting a lots of sellers whom I believe got the shares for free as they are selling without looking at the price. If they are not getting those shares for free, they must be making big losses while the company is making big money. Nobody is as this unintelligent.

While rubber stocks are retreating its charm with the declining CPO, the chip stocks are getting cheaper as well. Year end is always a good time for Intel as companies are stocking up computers to sell. We can only see the true picture of PC market on 1Q of 2010. Those shipped computers may not end up in consumer's possesion. They may end up being displayed on the showrooms only or in the warehouse. We will see how the inventory posts any warning sign in Q1 2010 earnings report in April. Many pros may sell their shares in March in that case just to lower their risks in equity.

With rubber and chips less focused, woods and metals are having small party in the back yard and shoemakers are having their own small party as well today in KLSE:

KLSE is losing steam due to JAL announcement of bankruptcy that send Nikkei to drain. We will see more of this decline in the afternoon session. What's the worst thing that can happen to a company? Yes, bankcruptcy.

US will be resuming its trading tonight (MYT) after a president's day that is not supposed to be happy about as the Haiti's condition is getting worse. But there is no major economic bad news around the world except this JAL problem. Softness is to be expected next. US may have good earnings in the line-up but so are the expectations. If expectations are being set too high, dissapointment can send the trading mood lower.

Have a nice day!

Chip is not Cheap

As expected, the Nikkei reacted to last Friday's US stock market dip. The next is Hong Kong Stock Market. KLSE or Bursa is painting another picture. It is rotating its bet on the hot sector. Today's hot item: the chips.

Intel's hot earnings results were finally appreciated in Malaysia whereas the rest of the world already celebrated its success last Friday.

With declining interest to rubber, Malaysians are chasing a new sector, the chip sector. Most of the chip related counters are extremely high in PE. Those chips are not cheap.

People just dump their rubber and jump into chip obviously regardless of they are very expensive. To name a few, IPOWER, PENTA, REDTONE, ASIAEP, IRIS, ...

This is a very common phenomenon as people are rushing to chase after easy profits. It is just like in a super departmental store or mall. People rush to counters wherever there is a impromptu sales (discount) or lucky draw. The crowd is running around very happily like there is free food to give away. This is the time everyone thinks money does fall from the sky.

I was setting a few queues to buy something. Looks like it is not my cup of tea today as I don't like to run around chasing for free food. I believe in hard work and real profits. Young people should have the energy to chase around. I don't belong to that age group anymore.

To Buy or Not to Buy? Part II

When the pros are reducing their stakes in stock market, the new hands or low income individuals are increasing theirs. This is a heartbreaking situation as the weak will be holding the stocks when the prices start to collapse. This is the truth of a stock market. There should always be someone to hold the hot balloon. Anyway, I am not saying the KLSE will be having a correction soon, stocks are just overbought. One can easily tell by looking at the PEs. An orange can cost 10 cents when the demand is low and cost 10 ringgit when the demand is high. Now a KLSE orange costs around 5 ringgit. There are still rooms to grow to 10 ringgit per orange but the risk of dropping back to 2 ringgit is getting higher and higher. (assuming stocks have unlimited supply - there are always sellers for almost any KLSE stock)

Smart or experienced investors know when to buy and when to exit. Novices tend to just follow others to make quick money. Greed is something hard to control.

Intel Thursday good profit news were expected make a good impact on stocks on last Friday but the opposite happened. It was due to the USD problem again. As US economy is improving, the USD will shoot back up which caused the commodity and energy stocks to retreat. Last Friday was plagued with this curse again. The rising USD may once again press the equity down but for how long? It depends again on the next unemployment report. As earnings season in the US has kicked started with mixed result, Alcoa and JP Morgan are showing weakness in the revenue and Intel is showing the opposite. I suppose profit will be less focused in this earnings season and revenue will play a bigger role as it reflects the consumer spending capability. Profit can be easily manipulated but you can lie about revenue. That is what most investors will be paying attention to.

My current holding positions in Bursa is small. There is nothing much to worry about. The question now is again "To Buy or Not To Buy"? I have several picks in my head but I will only reveal after I bought them. I don't want to influence the market or let unscrupulous traders to buy before I buy. They are for short term only. It is dangerous to keep stocks from now until April. Hope they are good buy and not good bye.

Dow's Down. What's Next?

Everyone seems eager to know what is going to happen on Monday.

Classic response to this is "dip in the morning session, may recover in the afternoon".

Dow finally gave up its complacency for holding up gains even there are bad news. Dow is finally back to normal.

Back to KLSE, up or down? In fact, I need to check out blogs and newspapers to see everyone's reaction. People tend to be driven by news and gossip. I hope what I mention here doesn't affect the market trend on Monday. It's sad if people follow what I said as they've lost their brain to analyse themselves. For people who don't know how to make simple analysis tend to lose control over tough situations in their life. Not just investment decisions.

Eventually, desparate buyers will push the price up and desparate sellers will press the price down. This law of trading is fixed and no one can change that. The lack of desperation in any way will just result in stagnant stock price.

In a KLSE forum, I see the desparation of buying. In blogs and newspaper, everyone is talking about a pre-CNY Bull market. The sentiment is "fearless". The opening of Monday may not be good but there will be a lots of bargain hunters that make stock prices fluctuate quite a lot. Bull is still winning but may be waning too.

I believe many will have stock list in mind and buy when there is a dip in Monday morning.

Here is something to wish everyone good luck:

The Hot Wind and The Calm Wave

Hot Wind: KLSE

Why? People buy anything that is in the top 10 active list. Traders are looking for potential surge stocks by asking around. This is a warning sign for experienced traders. The bubble is getting bigger. The CNY of 2007 paints a clear picture of how such bubble was inflated and burst.

Calm Wave: US Stock Markets

Why? US has been in the sideway mood for the past few sessions despite various bad news. Even the Obama's intention to tax bank isn't strong enough to shake Citigroup share price. Intel strong PC sales figure might stir a rally in the US tomorrow.


Conclusion: Wish good people make more money than bad people as in stock market (usually it is the opposite), some people will win and some people will lose. There should always be someone who is holding the hot balloon.

The Feel Good Factor - The Stock Market Wisdom

Why do people lose money in a stock market rally?

Simple, during a stock market rally, people will follow tips to make fast money.

Usually tips given are of "syndicate" type not the "good company" or "cheap stock (low PE)" type.

These "syndicate" type stocks are expensive.

You bought expensive stocks and you expect to make money? Sure experienced traders can make big money from such rally. Syndicates need to reward some to lure more. Just like the first prize of a lucky draw. If the prize is lucrative, there will be more people participating. More participation means more sales. More sales mean more income for the organizer.

For me, the feel good factor is very important. Even if you lose money, you need to feel good. Even you make a mistake, you need to feel good. What's the point of investment? To feel good. What's the purpose of making a lots of money? To feel good. If you feel bad after making mistakes or missing a boat, you defeat the whole purpose of investment: to feel good. Even if you feel good at the end of a big profit, you cannot compensate the bad feeling you had in the past. You conflict with your own purpose and you will repeat the same mistake in other area in your life, not just in stock market.

Therefore, the feel good factor is very important in investment in stock market. Even if you make a stupid mistake, try to think that you have tried your very best to invest, to a brighter future. Learn from the mistake and really accept your mistake, you will get more mature in stock market and you will finally understand why 90% of the people lose money in stock market and you will feel very good conquering yourself and uncovering the stock market myth.

Rubber Deserted. Welcome Furniture Wood and Metal.

Syndicate's rotational play continues. Rubber related counters are no longer favorable. They are similar to squeezed lemons. Today it looks like metal is the new black. LEADER will be a signal to lead to this metal area. And LEWEKO may be a speculation of CNY can promote hot sales on furnitures.

Gamble at your own risk.


UPDATE: LEWEKO is not a major furniture seller. It's just an investment holding company for wood related products and services.

Chinese government is trying to signal a potential property bubble that leads to this correction. XinQuan will be less focused. Metal stocks will be in focus next. Bought 10,000 shares of MELEWAR @70 cents.

Shares on hand:
BSDREIT 2000 shares @ RM1.30
XinQuan 5000 shares @ RM1.20
Melewar 10000 shares @ RM0.70

Buy order of 10,000 MELEWAR @ RM0.70

Not for gamble but for value and growth. Please try not to follow my purchase. I don't want to use this blog as a protection for my holding, as promoting shares on blog to solicit buyers to prevent shares from falling hard is unenthical in my opinion. This blog is to record a "WHY" things happen not "HOW" to become rich and "WHAT" to buy or to compete with other smart investors. A blog is just a journal. Eventually, I hope I can show you a nice path to good investment practices if my methods are proven to be successful.

What's going on?

The dollar is falling and the commodity prices are reversing trend.

The unemployment rate in the US is the key:

Note that when the unemployment improves, the USD will go up (red). If unemployment rate is worse than expected (green, dissapointment), the USD will dop.

Overlapping the unemployment rate with DXY paints a clearer picture. Sorry in fact the unemployment delta chart should be used to show the difference between sequential month but this is good enough to show the trend.










Now what? Commodity prices will resume its uptrend. All those gold, O&G, metal, plantation related stocks will be the targets for many short-term buyers. If you know why they are going up, you should know when they will go back down. Yes, if US unemployment rate improves or US Fed raise interest rate. That is the time when USD will go up. As for Malaysian stock market, it is now displaying a "rotational play" trend by syndicates. It is an usual trend before CNY although SC may see it as unusual market activity. I do agree with SC Malaysia.

Hope you like this sharing.

Volatile Trading Day?

As mentioned yesterday, it is going to be a volatile day:

This is just the morning session. We will know whether this volatility continues until the end of the trading session.

There are people who are willing to buy and they are people who are scared due to mixed bull and bear news. Volatility is the result. But this only shows the 30 Bursa index shares.

Closing Update:

Classic opening with fear (bear) factors, followed by bargain hunting activities from 9.30am to 10.00am. The uncertainty phase is domainated by news of US accusing China for exporting toxic material. Since HK is not influenced by this news after an hour of opening trading, Bursa charged on from 11am to 11.30am. After that, series of profit taking activities were taking place until closing. The morning session is volatile but the afternoon session is not.

US will need to face falling USD problem tonight. Usually commodity prices will go up as a result followed by surge in equity unless there are more bad news.

Bull vs Bear

Next week will be an interesting week with bulls and bears ramping across the same plain:

The bull factors
- CNY in the horizon (Asia)
- Gambling mentality is the highest stirred by rising prices (Asia)
- Forums and blogs are making buy calls (Local)
- Everyone is seeking a fast way to make quick money for Ang Pow as bonuses are being cut across the employment market (Asia)

The bear factors
- US unemployment rate is not improving (International)
- JAL will be announcing backrupcy soon (International)
- Malaysian vandalism to religious structures (Local)
- Rising toll price in Malaysia (Local)

My call
- Volatility

I believe the market will be quite volatile next week as bulls and bears will be gambling on the same table. Interesting week ahead. Get yourself ready for the ride!

US Unemployment Rate

Here is a chart I compose using Excel:

The bar in red shows the key data announced last night in the US.

What does it mean?

US has the largest consumer base in the world. If the unemployment rate remains at 10%, it is not going to help the global economy. There are a lots of people in China and India but their consumption cannot compare to the US.

The good thing is that the earth is "greener" if global consumption goes down. But the world population is increasing at a fast pace.

How does it impact the stock market? We first need to look at USD. DXY dropped 0.5% which is pretty huge for one day. The US Fed may not raise interest rate that quick although it has informed banks that it is imminent.

USD has a very close relation with the US unemployment rate. Since US is having a consistent unemployment rate of 10% for two consecutive months, I expect the USD will go sideway.

If USD goes sideway, so is the stock market. But the world was expecting a better a better employment picture in the US. Those who had high hope may start to reduce their position in the stock market as well as USD.

Have a nice weekend!

XinQuan or not XinQuan?

The demand for the stock has diminished and so are the rest. This shows that the earlier demand was due to stock-chasing mentality and not its value.

I have been making a lots of trades for the past few years and the result is not encouraging.

I notice one thing that those money making folks share in common: patience.

In Chinese, it is called "总有一天等到你". A favorite slogan used by coffin maker.

If the stock you are holding is of good value, you have nothing to worry about. Just make sure you don't dump everything into one basket only. Good company can also face bad things some day.

I notice people in a  forum (better not mention the URL) make money from this simple principle: patience. Every stock rise at different timing. Don't ever expect the stock you buy go up all the time. You are not God or some sort of supreme being. You are only human. Those who have patience, make a lots of money. Those who are not, get confused between loss and gain.

Still holding on to 5 lots of XinQuan and 2 lots of BSDREIT.

12.25pm Update: For new IPOs, there are always people who got the shares for free such as staffs, managers, and directors. They don't care about the price they sell. They need cash before any festive season. Since they got the shares for free, they just sell at any closest price without lining up in a queue. This is a bad side of buying an IPO share.

How to spot a bubble?

What is a bubble anyway? The rise of price or business activity that doesn't reflect the real demand?

We need to look at chart.

Here are US Housing Price Index (US housing bubble) and the Baltic Dry Index (Pre-Olympic Bubble):

Do they look similar? Now you should be able to check out the stock with such potential.

The common mindset of bubble is that the sky will drop money. When everyone is making money, others will follow and forgot about one basic rule of supply and demand.

Money doesn't fall from the sky. You can sell a rare item for a high price. But if it is rare, the supply is low. If the supply is low, your high price is justified.

If the price is high while the supply is also high, just like the US housing supply and shipments to and fro China, something is wrong and a potential bubble will be formed.

For stock market, PE is to decide whether the price is justified or not. Consistency in PE or PEG is also important to check if the earnings is not manipulated. But most people think that share prices can go up a lot even if the company is not making money. But where do the money come from? During IPO, shareholders contributed fund for the company to do business. The money you bank in to CDS is real money right? Is it from the sky? The company then use your money to buy things to do business. The money is real right? Then the business start making money and the money is real right? How do you think you can benefit from the earnings from the company?

It's all about profit. And it's also about growth. Just like your shop. If your shop is making money, you need to share it with your business partner. A listed company is nothing different. They are also not allowed to print their own money and distribute as dividend. Hope young people these days know where the money is actually from and the sky doesn't drop money. Just like when you buy a share you need to pay real money from your bank account and also the person who sell you the share will get the real money from you.

Sorry for being carried away. This is a very common mistake in KLSE where people have a very shallow knowledge about money. They still think money can be manipuated to grow not by real business profit. Yes, it is able to grow but not for too long. When market is bad, professional will evaluate your company business condition to judge the value of your stock. If it is cheap, people will buy or hold, and the share price will not drop much.